Sunday, November 23, 2008

Wagner & Brown, Ltd. v. Sheppard (Tex. 2008)
No. 06-0845 (Tex. Nov. 21, 2008) (Brister)
(oil and gas law, pooling, lease expiration)
WAGNER & BROWN, LTD. ET AL. v. JANE TURNER SHEPPARD, INDIVIDUALLY AND AS INDEPENDENT EXECUTRIX OF THE ESTATE OF SYBIL TURNER, DECEASED; from Upshur County; 6th district (06-05-00023-CV, 198 SW3d 369, 07-14-06) The Court reverses the court of appeals' judgment, renders judgment in part, and remands the case to the trial court. Justice Brister delivered the opinion of the Court. (Justice Willett not sitting)

FROM THE OPINION: One observer has estimated that 85 percent of the 27,000 wells drilled in the East Texas oil field in the first half of the 20th century were unnecessary — resulting in a huge waste of money and natural resources.[1] As one means of reducing excessive drilling, the Texas Legislature provided for voluntary pooling in 1949,[2] and compulsory pooling in 1965.[3]

Since then, this Court has never addressed how a pool of producing properties is affected if a lease in the pool expires. In this case, the courts below held that expiration of a lease removes those minerals from the pool and bars recovery of any costs incurred before termination. But the pooling agreement here did not depend on the continuation of underlying leases, nor was the equitable right of reimbursement for improvements necessarily extinguished by termination of the lease. Accordingly, we reverse and remand for further proceedings.

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